Prosaposin (PSAP), a multifunctional protein, plays a central role in various biological processes and diseases. It is the precursor of lysosomal activating protein, which is important for lipid metabolism and glucose metabolism. PSAP is implicated in cell signaling, neuroprotection, immunomodulation, and tumorigenesis. In neurological disorders, PSAP acts as a neurotrophic factor influencing nerve cell survival and synapse growth, and its dysfunction is associated with a variety of diseases. It modulates immune responses and macrophage functions, affecting inflammation and immune cell activities. The role of PSAP in cancers is complex, because it promotes or inhibits tumor growth depending on the context and it serves as a potential biomarker for various malignancies. This review examines current research on the functional and pathological roles of PSAP, emphasizing the importance of PSAP in Gaucher disease, neurodegenerative diseases, cardiovascular diseases, and cancer. In order to develop targeted therapies for various diseases, it is essential to understand the mechanisms of action of PSAP in different biological processes.